Robinson Department Store

Robinson Department Store Plc (ROBINS) 

We expect Robinson’s earnings to accelerate as it continues to expand into the fast-growing Thai upcountry. We believe Robinson will remain the dominant player there over the long term as we foresee little competition from other operators. We upgrade our FY12-14 EPS estimates and maintain Outperform with our DCF-based target price raised to THB80 (12.1% WACC, 6% LTG). We are positive on Robinson given its accelerated store openings in Thailand’s fast-growing
upcountry. There, it will have overwhelming market share and dominate for the foreseeable future. 

Sales accelerating
The recent boom in upcountry growth has played a significant part in Robinson’s success. We maintain the view that upcountry Thailand will continue to prosper over the mid term given rising incomes, urbanisation, populist policies and easy bank credit. With a current 77% upcountry market share and as it expands more rapidly than competitors, we expect Robinson’s sales and SSSG to remain robust, resulting in an increase in margins and earnings. Unlike hypermarkets, Robinson’s department stores are welcomed by rural communities as they do not compete directly with local retailers and are perceived as bringing a certain ‘prestige’ to growing communities.

Competition far behind
Robinson’s major shareholder (the Central group) is also the owner of its largest competitor. However, Central stores focus on capturing higher-income consumers in Bangkok and the largest provinces. Therefore, we expect Robinson to continue opening stores over the mid term with little threat from modern competition, allowing it to be the dominant upcountry player and gain market share as incomes rise.

Attractive risk-reward
We believe that a higher proportion of stores located in fast-growing areas with low competition will continue to boost Robinson’s earnings in the near and mid term and will remain a positive catalyst for the stock price. Downside risk is limited to a provincial economic downturn.